Oil prices rise on Iranian comments, Iraq kidnapping

AP , NEW YORK

Oil prices rose by more than US$1 a barrel on Friday, reversing a three-day decline. Brokers attributed the rise to tough talk from an Iranian cleric and the kidnapping of a senior Iraqi petroleum industry official -- proof that the killing of al-Qaeda's leader in Iraq did not mark the end of instability in that country.

Also, a Nigerian government official said more than 800,000 barrels a day of the country's oil production was shut -- about 60 percent more than previously reported -- because of violence in the Niger Delta, Dow Jones Newswires reported.

Meantime, Valero Energy Corp experienced a "total power failure" at its 240,000-barrel-per-day Aruba refinery on Wednesday night, a spokeswoman said on Friday, adding that it would be at least two weeks before the plant would be operating at "reduced rates."

Fimat USA oil broker Mike Fitzpatrick said the oil market is staring at a "wall of worry" that includes strong global demand, geopolitical unrest and the Atlantic hurricane season.

Light sweet crude for delivery next month climbed US$1.28 to US$71.63 a barrel on the New York Mercantile Exchange. In London, Brent crude gained US$1.43 to settle at US$70.48 on the ICE Futures exchange.

The cost of crude is roughly 30 percent more than a year ago, and US gasoline pump prices average US$0.76 a liter. Gasoline demand keeps rising, albeit at a slower pace than normal, according to government statistics.

Oil prices jumped on Friday amid news that gunmen kidnap-ped Muthanna al-Badri, a senior Iraqi oil official in Baghdad, as he was returning home from work.

Analysts had cautioned on Thursday against reading too much into the US airstrike that killed Abu Musab al-Zarqawi, a Jordanian-born militant who led a campaign of suicide bombings and other violence across Iraq. Attacks on the country's oil infrastructure, including pipelines, were not directly linked to his movement.

"We're not out of the woods in regard to the insurgency in Iraq, and the market needs a couple of weeks, maybe a month, to gauge the situation before prices will ease," said Mark Pervan, commodities analyst at Daiwa Securities in Melbourne, Australia.

Vienna's PVM Oil Associates said that despite al-Zarqawi's death, "the general level of political instability and violence as well as the absence of a new legal framework" will continue to keep oil-related investments -- and crude exports -- down in Iraq.